a. Finance Allocation of resources and funds of the organization in order to maximize the wealth. Firm obtained funds both from external and internal sources at a lower possible cost via sale of stock, bonds, bank loans, etc. Allocation of resources is another aspect of finance as per the needs and the requirement of the business.
b. Efficient Market in an efficient market the securities are fairly priced and reflect all the prevailing information with respect to the stock.
c. Primary Market Primary markets are those form of market in which companies raises their newly formed capital. Like General Electric sells its new common stock in order to raise the capital via primary market. Moreover, a company often introduces its IPO in the primary market.
d. Secondary Market Secondary markets are those form of markets in which existing stocks and securities are traded among the investors.
e. Risk An entrepreneur has viable information with respect to the investment but entrepreneur is uncertain with respect to the future either an entrepreneur gets the low or negative return.
f. Security a financial instrument either a stock which reflects the ownership in the company or a bond which indicates a relation with the company by granting a loan to the company. Security is often used a guarantee repayment of debt.
g. Stock Any individual invest in the business of the company and buying the part of ownership in the business. While the original owner issue the stock in the public. With doing this exercise owner of the business raises its equity finance as well as business wealth.
h. Bond a bond is a written agreement between a borrower and lenders in which the borrower agrees to repay a stated sum on a future date and to make periodic interest payments at specified dates (Myers, Brealey and Marcus, 2001).
i. Capital financial assets which is invested in the business in order to generate the revenue and also the profit. The capital mainly exists in the form of cash, inventory, equipment, machinery, etc. Moreover, companies often raises its capital by issuing stocks and bonds in the financial market.
j. Debt In debt companies sell their bonds, mortgages and notes either in primary or secondary market from which companies generate its finance. Debt is feasible when an entrepreneur wants to fund its assets and knows that the business will produce a positive cash flow stream.
k. Yield the actual rate at which bond or security is issued is referred as yield.
l. Rate of Return the return of the company either in form of realized or unrealized gained or lost which the company generates throughout the year in relation with their investments.
m. Return on Investment used to assess the profitability of a firm. The formula of ROI is (annual profit) (investment capital). The concept of ROI is applied on project management, real estate, investment made in the stock market, etc. In addition, if an entrepreneur wants an immediate result with respect to its revenue generation, market capitalization and other related matters then ROI provides appropriate results. The major theme and purpose of ROI is to correctly figure out the capital investment decisions.
n. Cash Flow Cash flow discussed over the companys operating activities (review the increase and decrease in current assets and current liabilities), investing activities (review over the sale and purchase of fixed assets) and financing activities (review over issuancepayment of loan, issuancerepurchase of share, dividend paid etc) during the year. It also discussed on the in flow and outflow of the cash and also on the cash equivalents.
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